Brussels, Inc.

Aug. 8, 1999


Privatization revitalized the Belgian airport in the ’90s; soon, it may revolutionize how airports operate

BY John F. Infanger, Editorial Director

August 1999

BRUSSELS — In the mid-1980s, this city, which is often referred to as the capital of Europe, faced a comprehensive modernization effort of its airport terminal and other facilities. As a result, in 1989 a private company, the Brussels Airport Terminal Company (BATC), was formed to build and operate the terminal. By 1994, a new terminal and concourse (Pier B) were officially opened.

But the privatization initiative and its impact on Belgium and neighboring European countries doesn't stop there. Much like the rail stations in major cities across the continent, the Brussels Airport has become a primary transfer point for passengers at a time when inter-European travel is increasingly becoming less cumbersome.

In retrospect, the timing was on target.

Today, initiatives underway could prove to be just as well-timed in an airport industry that is undergoing dramatic change worldwide. BATC is no more, transformed into the Brussels International Airport Company (BIAC) in 1998 when it merged with the Airport & Airways Agency, which had operated the Brussels airside operations.

Perhaps the most striking initiative is the exploration by BIAC officials of aligning with other European airports to further build on efficiencies, offer a wider range of travel options to travelers, and potentially counterbalance the alliances created by major airlines in recent years. And, by 2001, the company hopes to have reduced the state's ownership from its current 63 percent of Brussels operations to 25 percent, at which time it will open itself to outside investors on the stock market.

"We combined our efforts with the purpose of being able to go to the stock market," explains BIAC chief operating officer Mark Duyck. "We are at the moment a mixed company. We have private shareholders and we have the state as a shareholder. Right now, we're moving toward a 50-50 ownership so there will be more of a balance of power.

"Current thinking is that after 2001 the state will further sell its shareholdership. We understand that airports are still strategic businesses that would not be completely commercialized; even BAA in the United Kingdom has certain restraints.

"Airports are still part of the public scene and you need to be synchronized with what the public thinks. So, the best way of mixing the public interest with the commercial interest of an airport is to have them on your board as a representative of the people."

An Ongoing Transformation
Brussels International is currently the eleventh busiest airport in Europe with some 18.5 million passengers annually, more than four million of which are transfer passengers. In 1998, passenger counts jumped 2.5 million and by 2010 projections estimate the airport will handle some 30 million passengers or more. Sabena, the Belgian-based dominant carrier here, handled almost nine million passengers in 1998, a 27 percent increase.

The airport transformation, which focused initially on construction, continues. The company successfully modernized the information technology processes during the 1990s to the point that it created a separate subsidiary that now markets its services to other airports (see sidebar, page 15). And, construction is underway on a $216 million concourse (Pier A) at midfield for inter-Europe travelers.

Along with a modern terminal came new retail facilities that are injecting necessary revenues and are helping to make Brussels an attractive airport for air carriers. "The fact that we have invested in retail means shopping facilities have led to our airline fees being very, very low," says Duyck. "Our ranking in Europe, although we are not the cheapest, for rates and charges is very low, which is a direct benefit for the airlines."

The 1998 merger that created BIAC also offered another challenge, integrating private sector employees of BATC with civil servants from the Airport & Airways Agency.

"We're at the beginning," says Duyck. "We're at the stage of the process of what is called change management. We have to first review our procedures and see how we can become more efficient. Anderson Consulting is helping."

Regarding the assimilation of public sector employees, Duyck says one obstacle is overcoming the perception of lifetime employment for one type of job.

"We need to go where the rest of the business is going; that is, flexibility and mobility," he explains. "What we call acquired rights or vested rights should be designed to be questioned. If we live in a time when it's said you will have to do 3, 4, 5 jobs in a lifetime, how can you then say a guy can have lifetime employment if he doesn't want to change?

"You want to treat people equitably. Hopefully, one year from now we will have a better company."

At the same time, the company continually seeks new revenue sources as it prepares to reinvest some $750 million over the next five years, according to Duyck. One immediate concern is the loss of some $15 million in annual revenues with the elimination this summer of duty free for inter-European travelers.

Airport Alliances - Balance of Power?
One of the more innovative initiatives being considered by BIAC is the creation of a commercial alliance with other European airports, to the point of ownership possibilities. Schiphol has indicated an interest, as have others, says Duyck.

"We've had very open interest from Schiphol and looked at a plan which would combine the airports and make it one economic entity," he explains. "Now, whether Schiphol will be the best fit or whether airports need to align is a debatable question. I think they need to, just to restore the balance of power between airlines and airports.. The airline alliances have become such dominant factors, and I believe in a check and balance control situation rather than having one dominant factor."

Because the plate is already quite full for Duyck and his management team, he says, the idea of an airport alliance is currently on the back burner, but is still a very viable option. Duyck says that not only will the respective airports benefit from increased efficiencies and revenue potential, so will the users.

"In Zurich, they are talking about privatization. Everywhere in Europe you have the emerging idea that the state should not bother running our airports. The state should only bother about rules and regulations for security, minimum quality levels, the environment, and so on.

"There's some interest on the side of Zurich to ally with Brussels, and some on our part. It's in the embryo stage.

"On the revenue side, we could combine routes. Maybe we can merge and offer a concept of twin cities in which you can go to Rio de Janeiro daily — three times a week from Zurich, four from Brussels. We already see where people who go to Rio prefer to depart from London or Frankfurt. Passengers will see it as more user friendly, ultimately making us more profitable."